The UAE will continue the current system of sponsorship for foreign workers and hopes to transform itself into a knowledge-based economy in the next 10 years.

Minister of Labour Saqr Ghobash Saeed Ghobash on Tuesday supported the legality of the sponsorship system and called for ways to deal with concerns about its implementation, rather than scrapping the existing system.

Dh50 billion: UAE’s yearly social spending on expats

The UAE government spends about Dh50 billion per year as indirect social costs for the expatriate labour force in the country, according to a study.

The study by Dr Mouawiya Al Awad, Director of Institute for Social and Economic Research, Zayed University, says that the overall social cost, such as energy subsidies, public services and infrastructure, social security etc, is estimated to be Dh14,066 per expat worker. However, a foreign worker pays an average of Dh2,507 annually in various fees to government departments. Therefore, the study said, the average annual social cost per foreign worker is estimated at Dh11,559.

The study, which excluded the social costs related to domestic workers, said 80 per cent of the 4 million expat workforce in the private sector were unskilled workers while the rest were skilled. The private sector bears an overall annual administrative and recruitment cost of around Dh2,674 per worker — Dh3,404 for skilled workers and Dh2,296 for unskilled workers.

Pointing out that an additional investment of Dh22 billion per year will be needed for the UAE government to achieve its goal of having a knowledge-based economy and balance the ratio of unskilled and skilled workers at 40:60, Dr Al Awad called on the private sector to pay up a part of this cost through better partnership with the government.

Presenting the details of the 2009 UAE labour force survey, which was carried out among 21,000 individuals from 7,900 households, Dr Rosalia Vazquez–Alvarez, economic adviser, Economic Policy and Research Centre, Dubai Economic Council, said 56 per cent of Emiratis were working while 77 per cent of expatriates were employed. The unemployment rate among the Emiratis was 31 per cent while it was seven per cent among the expatriates. The rest of the sample were housewives.

Comparing the wages and education levels of Emiratis and expatriates, Dr Alvarez said the UAE labour market did not pay up the workforce, especially Emiratis according to their educational qualifications and experience, discouraging youngsters from pursuing higher education to achieve better positions and benefits at work.

His comments during a workshop on ‘Wages and Cost of Labour in the UAE’, organised by the Ministry of Labour and the Dubai Economic Council, comes two weeks after Kuwait announced its plan to scrap the system in February 2011.

Under the sponsorship rule, foreigners need the approval of their local sponsors to enter, work in the country or switch jobs. In 2009, Bahrain became the first GCC country to allow foreigners to change employers without the approval of their sponsors.

The minister said the framework of sponsorship system was legal and healthy and adopted by many countries. “I don’t support the idea of abolishing the system [of sponsorship]. What we need to look at are amendments to practices [surrounding it],” he said.

However, he pointed out that certain practices attached to the system in the region might not be correct.

“If the practices allow the employer to exploit the employee for a long period of time, it means the provisions [of the system] are not established properly in the market. We need to open a dialogue on the practices linked to the system,” Ghobash said.

He also opined that the gaps in the wages between nationals and non-nationals will shorten if the system was flexible.

“There’s a shortcoming between the different wages, especially in the last few years, which made the provisions of Emiratisation more difficult. We do find this in the public sector, especially in Dubai and Abu Dhabi.”

He called for better partnership between the government and the private sector and more contribution from local universities to encourage local workforce in the labour market.

The minister said the federal government’s vision 2020 is based on a strategy to achieve a knowledge-based economy, reducing the huge imbalance between the influx of unskilled and skilled workers in the country and increasing the role of Emiratis in both government and private sectors.

Chief Economist at the Economic Policy and Research Centre of Dubai Economic Council Dr Abdulrazak Alfaris said the sponsorship system could be amended to become more flexible to attract highly skilled workers to the labour market.

Dr Ahmed Al Yousha, chairman of the Bahrain Economists Association, said his country added “a small dose of fairness” to its model by scrapping sponsorship. However, he said, other regulations were introduced to regulate mobility in the labour market.

Readers' Comments:

The figures in this article are certainly eye opening and hence I found this article informative. Knowing the annual costs that the government bears per expatriate worker, it would be interesting to conduct another study to deduce the annual revenues that the government earns directly or indirectly per expatriate worker. Lingering on the same point, it would be interesting to learn the average annual costs private companies incur for operating in the country. – Shiraz, Dubai

What ever the system it could be it should allow the employee to move between companies freely, it will force the employer to look after employee more fairly. This could even bring less labour disputes as the non performing companies will not be able to survive by keeping workforce forcefully with out allowing them to move to other companies. How ever employer may enter into a contract with the employee that if he decides to leave within a very short period of time then he pays back the cost of visa process. - Pratheepan, Dubai

May be the labour minister idea sound good, but where as I can suggest is to scrap the sponsorship system for better investments opportunity for expats. If they continue sponsorship system, they have to make the rules flexible for partnership agreements & other categories of jobs. We still have the procedure for medical, Labour Card, Emirates ID Card, & Visa every three years etc. – Imran, Dubai